Arbitration, Mediation and Conciliation
Historically, methods used to settle disputes have ranged from
negotiation, to courtroom litigation, and even to physical combat. The
legal needs of countries, multinational companies, and ordinary people
have changed over the last decade. When faced with a dispute, business
people are learning that, whenever possible, it is more advantageous to
reach practical and private agreements than to fight for years and spend
huge amounts of money in courtroom battles. Due to the vast amounts of
time and money involved in the trial process, the American and Italian
business communities have increasingly turned to legal alternatives that
are more prompt, private and economical than the courtroom. Alternative
Dispute Resolution (ADR) refers to the wide spectrum of legal avenues
that use means other than trial to settle disputes.
The main ADR alternatives to civil litigation are negotiation,
arbitration, conciliation and mediation. Other, more particular ADR
processes available are early neutral evaluation, mini-trial, summary
jury trial, and the judicial settlement conference. Disputing parties
use these ADR methods because they are expeditious, private, and
generally much less expensive than a trial. While each of these ADR
processes may be effective in various circumstances, mediation in the
United States has proven to offer superior advantages for the resolution
of disputes that resist resolution.
In comparing the use of ADR processes in the U.S to those available in
Italy, it is paramount to recognize the fundamental legal difference
between the two nations; the American common law system is very
different from Italy’s civil law system. Despite that basic difference,
both countries have the concept of arbitration firmly entrenched within
each of their respective legal systems, as an alternative to the
courtroom. While mediation is a concept widely used in U.S., it has yet
to truly benefit the legal community in Italy as a viable means to
settle disputes. In Italy, mediation is a concept that is often
mistakenly confused with conciliation; although the two methods have
similar aspects, they are fundamentally different. To appreciate the
differences between arbitration, mediation, and conciliation, it is
helpful to explain them separately.
Arbitration.
Arbitration is an ADR (alternative dispute resolution) method where the
disputing parties involved present their disagreement to one arbitrator
or a panel of private, independent and qualified third party
“arbitrators.” The arbitrator(s) determine the outcome of the case.
While it may be less expensive and more accessible than trial, the
arbitration process has well-defined disadvantages. Some of
disadvantages include the risk losing, formal or semi-formal rules of
procedure and evidence, as well as the potential loss of control over
the decision after transfer by the parties of decision-making authority
to the arbitrator. By employing arbitration, the parties lose their
ability to participate directly in the process. In addition, parties in
arbitration are confined by traditional legal remedies that do not
encompass creative, innovative, or forward-looking solutions to business
disputes.
According to the Italian Civil Procedure Code (I.C.P.C.) § 806, parties
in conflict may chose neutral arbitrators to decide and settle a
dispute between them, as long as those disputes are not already of the
type designated to be handled within the court system. In Italy,
arbitrators are generally attorneys or law professors, and are chosen by
disputing parties in respect to their experience and competence in
specific areas of law. When a disputed matter is to be given to a panel
of arbitrators, each party selects their own arbitrator, and together,
both arbitrators appoint a third one as the president of the panel. If
they able to agree on a common choice, the parties may instead appoint
and utilize one sole arbitrator to assist with the dispute. Typically,
to use arbitration in Italy, there must be an “arbitration clause”
already written into contract that exists between the two parties.
I.C.P.C § 808 labels this clause the “compromise clause” (clausola
compromissoria). The procedures that the arbitrator or the panel must
follow during arbitration are inserted along with these contractual
arbitration clauses. Without this contractual arbitration clause,
parties may agree once a dispute surfaces, to allow arbitrators to hear
and resolve their disputes; this in know as a “compromise agreement”
(compromesso). Although this approach is laid out in I.C.P.C. § 806,
this avenue to arbitration is not very common because Italian legal
precedent has effectively demonstrated the need for those clauses to be
written into contracts before any disputes would surface.
Generally, the procedural rules regarding Italian arbitration are
formal but not as strict as the ordinary procedural rules that govern
litigation. Technically, the process of arbitration concludes with a
decision called an “award” (lodo arbitrale) and possibly an agreement to
deposit that amount within 180 days from the date the arbitrator
accepted the dispute (I.C.P.C § 820). In reality, however, the
conclusion of an arbitrated dispute is a debatable topic, since
arbitrators can prolong the process for a long time. There are two
types of arbitration either in U.S. than in Italy. First, in “binding
arbitration” (arbitrato rituale), the arbitral award (lodo arbitrale) is
comparable to a litigated judgment and is enforceable in respect to the
parties’ damages. Second, in “non-binding arbitration” (arbitrato
non-rituale) in Italy, the arbitrator renders a final decision similar
to that of a contractual agreement; specifically, the parties owe each
other an obligation as they would in a contractual arrangement. Under
Italian codes, this type of proceeding carries its own scheme of rules
and permits parties to obtain substantial justice by asserting a
“sentence of equity.” I.C.P.C. § 114 spells out what constitutes a
sentence of equity (pronuncia secondo equità ); a judge will decide how
the dispute will be resolved based on principles of equity, as long as
these rights are available to the parties and they request that the
judge should decide in this manner. Otherwise, the judge will decide on
traditional principles of law (pronuncia secondo diritto, I.C.P.C.
113). In the United States, non-binding arbitration constitutes an
advisory ruling by the arbitrator; the parties are not required to carry
out the decision unless they choose to do so.
The processes of appeal also demonstrate the differences between
binding and non-binding arbitration. An arbitration decision generally
has the force of law behind it, but does not set a legal precedent. A
determination arrived at through binding arbitration (arbitrato rituale)
can be appealed only when a party wishes to seek revocation, and, when
appropriate, can be done by a third party objection in front of ordinary
judge (I.C.P.C § 827 ). A third party objection is the usual procedure
that extends the length of the overall arbitration proceedings,
essentially becoming a double procedure, private at the beginning and
then in the enforcement phase. When a determination is made through
non-binding arbitration (arbitrato non-rituale), the decision can be
appealed only in exclusive and limited cases involving sentences that
can be enforced by an equity judgment. The appeal must be heard by new
arbitrators, who must be chosen with an increasingly selective eye in
regards to their experience and competency- a process, of course, which
involves more money and time.
Ultimately, the power of an arbitrator or panel of arbitrators is
granted directly by the parties. By including contractual arbitration
clauses, parties are agreeing to the resolution of their disputes
through a process that consists of very simple proceedings, which are
similar, but not equal to the traditional route of litigated
settlements. The arbitral award that concludes a dispute has the same
value as an ordinary judicial judgment, on the condition that parties
will proceed with the next formal step of registering this private
decision with the Italian Court of Appeal.
Mediation.
Mediation is an ADR method where a neutral and impartial third party,
the mediator, facilitates dialogue in a structured multi-stage process
to help parties reach a conclusive and mutually satisfactory agreement.
A mediator assists the parties in identifying and articulating their
own interests, priorities, needs and wishes to each other. Mediation is
a “peaceful” dispute resolution tool that is complementary to the
existing court system and the practice of arbitration.
Arbitration and mediation both promote the same ideals, such as access
to justice, a prompt hearing, fair outcomes and reduced congestion in
the courts. Mediation, however, is a voluntary and non-binding process -
it is a creative alternative to the court system. Mediation often is
successful because it offers parties the rare opportunity to directly
express their own interests and anxieties relevant to the dispute. In
addition, mediation provides parties with the opportunity to develop a
mutually satisfying outcome by creating solutions that are uniquely
tailored to meet the needs of the particular parties. A mediator is a
neutral and impartial person; mediators do not decide or judge, but
instead becomes an active driver during the negotiation between the
parties. A mediator uses specialized communication techniques and
negotiation techniques to assist the parties in reaching optimal
solutions.
Mediation is a structured process with a number of procedural stages in
which the mediator assists the parties in resolving their disputes. The
mediator and the parties follow a specific set of protocols that
require everyone involved to be working together. This process permits
the mediator and disputants to focus on the real problems and actual
difficulties between the parties. Moreover, the parties are free to
express their own interests and needs through an open dialogue in a less
adversarial setting than a courtroom. The main aim of mediation is to
assist people in dedicating more time and attention to the creation of a
voluntary, functional and durable agreement. The parties themselves
posses the power to control the process- they reserve the right to
determine the parameters of the agreement. In mediation, the parties
also reserve the right to stop anytime and refer a dispute to the court
system or perhaps arbitration.
In addition to economic and legal skills, mediators are professionals
who possess specialized technical training in the resolution of
disputes. A mediator plays a dual role during the mediation process- as
a facilitator of the parties’ positive relationship, and as an
evaluator adept at examining the different aspects of the dispute.
After analyzing a dispute, a mediator can help parties to articulate a
final agreement and resolve their dispute. The agreement at the end of
the mediation process is product of the parties’ discussions and
decisions. The aim of mediation is to find a mutually satisfactory
agreement that all parties believe is beneficial. Their agreement
serves as a landmark and reminds parties of their historical,
confrontational period, and ultimately helps them anticipate the
potential for future disputes.
Generally, an agreement reached through mediation specifies time
periods for performance and is customarily specific, measurable,
achievable, and realistic. It is advisable for the parties to put their
agreement in writing to create tangible evidence that they accomplished
something together. The written agreement reminds the parties of their
newly achieved common ground and helps to prevent arguments and
misunderstandings afterward. Most importantly, a written agreement
provides a clear ending point to the mediation process. The agreement
binds the parties contractually. In case of disputes concerning
compliance with the mediated agreement (e.g., whether a party carries
out an agreement) or implementation of a mediated agreement (e.g.,
disputes concerning the precise terms for carrying out an agreement),
the agreement is enforceable as a contract, as it would be in cases of
the non-fulfilment of any ordinary contractual provision.
Enforceability is necessary for mediation, as an ADR process, to possess
any legal strength or to impose any liability on the parties. It
should be noted that, in the United States, compliance with mediated
settlement agreements is high because the parties, themselves, create
the terms of the settlement agreement. Thus, enforcement proceedings
are relatively rare because the parties voluntarily carry out their own
agreements.
According to § 1965 of the Italian Civil Code (I:C.C.), a mediation
agreement is characterized as a transactional contract. A transactional
contract is one in which the parties, with concessions to each other,
resolve and terminate the present dispute between them. With the same
contract, they also resolve the issues that can arise in the future.
Disputing parties can initiate mediation anytime, whenever they believe
it would be beneficial. Disputes reach mediation in a number of
different ways such as through consent of the parties, a mediation
clause in a contract, or even a court order. Parties to a contract may
be required to submit a dispute to mediation according to insertion
mediation clauses in their contracts. Under such a clause, the parties
usually retain the right to choose their mediator and to schedule the
mediation session on mutually agreeable date.
Mediation clauses, in contrast to arbitration clauses, are not
“vexatious clauses” (clausole vessatorie) or what is known in the U.S.
as “unconscionable”. If the parties do not arrive at any settlement
agreement as a result of the mediation process, they are always allowed
to go to arbitration or litigation; thus, mediation does not deprive
parties of their right to due process. Binding arbitration clauses are
qualified as “vexatious”. As laid out in I.C.C § 1341, paragraph 2, and
1469, paragraph 3, nn.18 and 19, a vexatious clause is a provision in an
agreement that disadvantages one party, typically the consumer, to the
agreement. These types of clauses have to be signed separately by the
parties. Such a clause can be vexatious if not signed separately and
knowingly by each party because they can ultimately limit options and
deprive parties of their due process rights under the traditional
judicial system. I.C.P.C. § 808 provides a sort of exception to the
constitutional principle of natural jurisdiction, and, therefore has to
be regarded as vexatious. Again, a contractual mediation clause is not
vexatious, because the parties can always take their dispute through the
ordinary judicial channels or utilize arbitration for resolution,
without any penalty for doing so.
There are some particular advantages that exist in choosing an
alternative method of dispute resolution (ADR) such as mediation or
arbitration, as opposed to pursuing ordinary judicial proceedings. The
first advantage concerns the all-important consideration of economics
and the daunting costs of resolving disputes; arbitration and mediation
proceedings are by far cheaper in monetary expense than ordinary
judicial proceedings. Mediation fees vary in accordance with the hourly
rate of the mediator and the length of the mediation session, and are
usually shared equally by the parties participating in the mediation.
Another important advantage of alternative dispute resolution
proceedings is in the decreased time these proceedings customarily take
as opposed to the traditionally litigated dispute. Mediation is
regarded to be more time-efficient than even arbitration, since
proceedings have the potential to come to a productive close in under 3
hours. Mediation is not as formal as arbitration, and there are a
variety of mediation techniques available and employed depending on the
mediator’s personality, the parties’ personalities, and the complexity
of the dispute; mediation is an incredibly flexible yet functional
process. What substantially sets mediation apart from traditional
judicial proceedings and even arbitration is that the parties strive
personally to find common ground, and they work to develop mutually
agreeable solutions directly with each other and without any exterior
imposition of a decision by a judge or arbitrator. The efficiency of
the mediation process is evident in that it aims to avoid further
complication of the dispute and animosity between the parties- a
mediator actively uses specialized communication and negotiation
techniques to guide the parties to the realization of a mutually
beneficial agreement. Another advantage of mediation, specifically, is
that is seeks to generate an agreement that is realistic, which takes
into consideration the financial condition of the parties as well as all
other relevant circumstances and factors. Again, mediation is a
voluntary process and often it produces such desirable results because
it permits parties to express their own interests and anxieties
directly, while helping them to create a suitable solution.
Generally, choosing arbitration or mediation is attractive to parties
because they get to participate in these proceeding more directly than
they would in a courtroom or in a litigated dispute proceeding. However
in arbitration, the arbitrator still makes the final determinations of
fault and compensation, and the parties must accept those decisions as
though they were made by a judge. Also, an arbitration proceeding is
governed by formal rules and the role of parties’ attorneys is still
central to the representation of their interests. With a mediator’s
help, the parties are increasingly empowered to participate directly in
the process and determine the outcome of their own dispute, thus
regulating and protecting their own interests.
Another important difference between arbitration and mediation exists
in regards to choosing the neutral party. In choosing an arbitrator,
the parties seek to select an individual that possesses particular legal
skills, knowledge and competence. With the exception of non-binding
arbitration in Italy, the arbitrator determines that outcome of the
dispute according to traditional legal principles, so the arbitrator
must be highly knowledgeable in the relevant area of law. In mediation,
the selection of a mediator can be made among individuals with a
variety of degrees and particular experience or specialized training in
the mediation of disputes. Mediators are often described as experts in
the process (of mediation), although it is generally helpful to
designate a mediator with some degree of subject matter knowledge as
well. Ultimately, mediation is a collaborative effort by all involved,
and to arrive at a satisfactory outcome, it includes the willing
cooperation and respect of all parties.
The mediation process is both informal and confidential. In contrast
to arbitration and its relatively formal rules of evidence and
procedure, mediation is flexible in terms of evidence, procedure, and
formality. Both procedures are confidential as the parties allow a
neutral third- party to discuss or decide the dispute without the
exposing the parties’ dealings to public scrutiny or judgment.
Specifically, the statements of a party during mediation are
confidential and may not disclosed without written consent. Generally,
confidentiality in mediation also extends to documents specifically
prepared for mediation, such an mediation briefs. Confidentiality is
paramount to the effectiveness of the mediation process--it creates an
atmosphere where all parties are increasingly comfortable to discuss
their dispute without fear that their words will be used against them at
a later date. Confidentiality promotes open communication about the
issues involved between the parties.
In regards to the logistics of the confidentiality component of
mediation, there are varied rules and customs. Typically, in the U.S.,
confidentiality of statements made during mediation is provided by law
(California Evidence Code Sections 1115-1128). In the alternative,
before a mediation begins, the parties may sign a confidentiality
agreement, acknowledging that all the statements made during the
mediation as well documents prepared for the mediation are confidential
and inadmissible against another party in any subsequent civil
proceeding. All participants in mediation are bound by confidentiality,
including the parties, the mediator, and non-parties. The scope of
confidentiality is broad, usually covering both statements made by
parties during mediation and documents prepared for mediation (e.g.,
mediation briefs). One generally recognized exception to the rule of
confidentiality is the mediated settlement agreement itself, which may
be used to enforce the terms of the agreement in the event of
non-compliance. Nevertheless, in order to promote open communication
and disclosure of relevant information, confidentiality in the mediation
process is broad.
One unique feature of mediation is that any party, unilaterally, can
decide to stop the mediation at anytime if they believe the process is
not productive, as opposed to an arbitration proceeding, which needs a
common approval to discontinue. To be effective, mediation must be
considered by the parties as a tool or instrument that the parties can
use to manage directly the resolution of their disputes between one
another. The focus is their direct, active participation as opposed to
the increasingly detached role the parties play in an arbitration
proceeding “run” by an arbitrator. In Italy, because mediation is new
and generally unregulated by legislators, the parties will sign a
confidentiality agreement prior to the commencement of a mediation
session. The pre-mediation confidentiality agreement will have the
force and effect of a contract acknowledging confidentiality as an
integral element of the mediation process.
Conciliation.
Conciliation is another dispute resolution process that involves
building a positive relationship between the parties of dispute,
however, it is fundamentally different than mediation and arbitration in
several respects. Conciliation is a method employed in civil law
countries, like Italy, and is a more common concept there than is
mediation. While conciliation is typically employed in labour and
consumer disputes, Italian judges encourage conciliation in every type
of dispute . The “conciliator” is an impartial person that assists the
parties by driving their negotiations and directing them towards a
satisfactory agreement. It is unlike arbitration in that conciliation
is a much less adversarial proceeding; it seeks to identify a right that
has been violated and searches to find the optimal solution.
Conciliation tries to individualize the optimal solution and direct
parties towards a satisfactory common agreement. Although this sounds
strikingly similar to mediation, there are important differences between
the two methods of dispute resolution. In conciliation, the
conciliator plays a relatively direct role in the actual resolution of a
dispute and even advises the parties on certain solutions by making
proposals for settlement. In conciliation, the neutral is usually seen
as an authority figure who is responsible for the figuring out the best
solution for the parties. The conciliator, not the parties, often
develops and proposes the terms of settlement. The parties come to the
conciliator seeking guidance and the parties make decisions about
proposals made by conciliators. In this regard, the role of a
conciliator is distinct from the role of a mediator. The mediator at
all times maintains his or her neutrality and impartiality. A mediator
does not focus only on traditional notions of fault and a mediator does
not assume sole responsibility for generating solutions. Instead, a
mediator works together with the parties as a partner to assist them in
finding the best solution to further their interests. A mediator’s
priority is to facilitate the parties’ own discussion and representation
of their own interests, and guide them to their own suitable solution- a
good common solution that is fair, durable, and workable. The parties
play an active role in mediation, identifying interests, suggesting
possible solutions, and making decisions concerning proposals made by
other parties. The parties come to mediator seeking help in finding
their own best solution.
Also the role of the attorneys is different in mediation. Attorneys
are more active in mediation in generating and developing innovative
solutions for settlement. In conciliation, they generally offer advice
and guidance to clients about proposals made by conciliators.
Conciliation and mediation both look to maintain an existing business
relationship and to rekindle a lost balance of power between two
parties. These concepts are sometimes used as synonyms, but they do
indeed vary substantially in their procedures. In mediation, the
mediator controls the process through different and specific stages:
introduction, joint session, caucus, and agreement, while the parties
control the outcome. By contrast, in conciliation the conciliator may
not follow a structured process, instead administering the conciliation
process as a traditional negotiation, which may take different forms
depending on the case.
Conciliation is used almost preventively, as soon as a dispute or
misunderstanding surfaces: a conciliator pushes to stop a substantial
conflict from developing. Mediation is closer to arbitration in the
respect that it ”intervenes” in a substantial dispute that has already
surfaced that is very difficult to resolve without "professional"
assistance. The parties approach mediation as an alternative method to
resolve their dispute, due to the fact that they both recognize that the
conflict has grown potentially serious enough for litigation.
Mediation may be used, however, any time after the emergence of a
dispute, including the early stages.
Each of the ADR (alternative dispute resolution) processes addressed
herein, arbitration, mediation, and conciliation, provides important
benefits to parties and may be seen as complementary to the judicial
process. In the United States, mediation has emerged as perhaps the
most predominant ADR process because it affords the parties the
opportunity to develop settlements that are practical, economical, and
durable. For commercial disputes, mediation also offers the opportunity
to create innovative solutions to business disputes that further the
unique interests of the parties in an analytical framework that is
broader than traditional legal rights and remedies. In this sense, the
mediation process may be used to secure "business solutions to business
disputes," because it encourages the parties to consider all the
dimensions of a dispute, including both legal issues and business
interests. In all parts of the world, including North and South
America, Asia, and India, large and small commercial entities are
recognizing the business benefits of mediation. According to
international and European trends, mediation is emerging as an effective
and often preferred method for private commercial companies and
government agencies to fulfil their organizational objectives by
privately and promptly resolving disputes in a manner that saves time,
money, and business relationships.
